Groundhog Day Trading

So I ended up taking out a lottery long ticket on the E-Mini last night and I’m feeling very iffy about it. After all my last attempt to play the long side failed and given the messy chop over the past two weeks has done a good job of conditioning my emotional state to be pessimistic about the bullish case. And that’s excellent!

Because quite frankly speaking emotions have absolutely no business in trading – they should be avoided at minimum and faded at best. And neither is there any room for hindsight bias which I’m clearly starting to fall prey to now. I take it your personal sentiment somewhat resembles mine.

To summarize many of the perspectives I have shared over the past week or so: Nothing really has changed technically speaking and, although the ‘big slip off the plate’ always remains a possibility given the Syria situation, this is exactly the type of coiled up inflection point I usually covet when it comes to trading equities:

Now here’s the E-Mini long position I took out yesterday near the close of the session. It has since bounced a little but remains pinned below that red diagonal I drew on the chart.

Bottom line here is that equities either manage to bounce here or will descend into the murky sulfur laden depths of Hades. That simple.

Another reason why I simply cannot be short at this stage are the seasonal stats which suggest that the most bullish week of the year in equities starts next Monday.

Although picking a decisive direction at this point is almost impossible I have to continue being long until the bears show they actually have any teeth.

The perfect spot to short was perhaps in late February near the double top. Yes, that’s hindsight talking, damn you cognitive biases! 😉

Okay a bit more chart candy for the bears, just so you know that I’m not a perma-bull hell bent on BTFD. VIX:VXV is looking pretty damn nasty still and has a long way to go to normalize.

Realized volatility in implied volatility is still subsiding and the after shocks of the late January sell off are still being felt, thus affecting participants. But just before a similar formation has resolved in favor of the bulls last time doesn’t mean it has to this time.

The SVXY was reduced from 1x leverage to 0.5 after the big January wipe out, which has affected the range on this ratio chart. However if the current reading is to be believed then we should be seeing a continued drop in the VIX.

Of course keeping option premiums elevated due to high IV is costly to anyone holding OTM puts and thus being exposed to increasing theta burn. So while this range may be annoying to you and I it’s manna from heaven for option sellers who are short vega and especially short theta.

Alright we’ve got setups – so if you’re a sub please grab your secret decoder ring and meet me in the lair:


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